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Keystone XL owner TC Energy seeking $15B from U.S. for costs of cancelling pipeline

cbc.ca logo cbc.ca 2021-11-23 Pete Evans
Even if it wins compensation, TC Energy says it has no plans to revive the pipeline itself. © Daniel Acker/Bloomberg Even if it wins compensation, TC Energy says it has no plans to revive the pipeline itself.

TC Energy Inc. has filed a formal request for arbitration under NAFTA rules, seeking $15 billion in compensation from the U.S. government for the money it spent on trying to develop the cancelled Keystone XL pipeline.

The company said in a statement late Monday that it has officially filed paperwork under a part of NAFTA rules that allows companies to seek compensation for lost investment. The case is moving ahead under NAFTA rules and not new ones made under its successor, the Canada-U.S.-Mexico Agreement (CUSMA), because it is a legacy case, and NAFTA was the trade law on the books when it started, said Erin LeBlanc, a lecturer at the Smith School of Business in Kingston, Ont.

"It's the largest claim for a Canadian organization against the U.S. government at $15 billion," she said, citing the figure first reported by Bloomberg of how much in damages the company is seeking.

U.S. President Joe Biden symbolically killed the pipeline on his first day in office earlier this year, the culmination of a multi-year saga under three U.S. presidents to build a pipeline to bring 900,000 barrels a day of crude oil from Alberta to refineries on the U.S. Gulf Coast.

The pipeline was proposed under the Obama administration, who ultimately rejected the application on environmental grounds. President Trump then revived the project, before Biden squashed it again.

Although TC Energy is trying to get compensation for the money it spent trying to develop the project, it has no intention of reviving the pipeline.

"As a public company, TC Energy has a responsibility to our shareholders to seek recovery of the losses incurred due to the permit revocation, which resulted in the termination of the project," the company said in a press release.

Long odds

LeBlanc said she thinks the case has huge implications.

"Governments on both sides are going to look at it because of the amount, but other companies are going to be looking as to how it gets handled."

And she also thinks TC Energy has some "valid claims" in the matter. The pipeline being suddenly nixed "amounts to indirect expropriation without compensation. Their investment was brought down to a value of zero by one stroke of a pen."

TC can also credibly claim it was singled out by the decision, she said. "It wasn't a policy change that affected a bunch of other organizations."

The Keystone XL pipeline would have expanded an existing pipeline to move almost one million barrels of oil per day. The Keystone XL pipeline would have expanded an existing pipeline to move almost one million barrels of oil per day.

The facts may be on their side, but trade lawyer Mark Warner says the company has a steep uphill climb to victory because of history.

"The United States has never lost any single case that's been brought under NAFTA Chapter 11," he said in an interview. "That's not to say it's impossible, but the cases that have succeeded have tended to succeed against Canada and Mexico."

Politics was a factor in the project being cancelled, and Warner says politics may prove to be TC's best chance of claiming a win in the matter, if the U.S. government decides it wants to settle for pennies on the dollar for political reasons to avoid a long, protracted fight.

"They've got deep pockets and they can wait the other party out, and they've had a pretty good track record of winning," Warner said. "It's always a possibility that the Biden administration says, 'We don't want to fight this,' but I think that's unlikely to happen."

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